Unlocking Payroll Compliance: 5 Common Mistakes to Avoid & Solutions to Stay on the Right Side of the Law

Home Care software for Payers

Navigating the treacherous waters of the home care industry, agency owners are discovering that neglecting payroll compliance can lead to a storm of financial troubles. With the Department of Labor (DOL) cracking down on audits, home care agencies are finding themselves on the wrong end of expensive settlements, reaching hundreds of thousands of dollars or beyond.

As of September 2022, around 7% of all DOL audits in the last year have been well within the home care industry. This all results in settlements in hundreds of dollars.

But fear not, for there are strategic measures you can employ to safeguard your agency, sail through the turbulent seas of legal issues, and chart a course towards safe and prosperous growth. Some of which are:

  • Apt Employee Classification:

    One of the most crucial steps to ensure home care payroll compliance is properly classifying your staff. In the industry, staff must be classified as W-2 employees and not 1099 independent contractors.

    Only the home care registries have the permission of classifying their employees as 1099s. However, registries differ from agencies in terms of business models, requiring a sacrifice of great deal of control, which agency owners have over their business.

    For avoiding costly litigation, it’s crucial to ensure apt employee classification, right from the onset. Many agencies are tempted to classify their employees as 1099s on the basis of competitors’ practices.

  • Rectify Overtime Pay Calculation:

    Overtime pay calculations can be tricky. However, it’s essential for home care software for payers to get it right. The overtime pay is 1.5 times an employee’s effective pay rate, which is not necessarily the same as their hourly base pay rate. The most effective rate is calculated as the total remuneration divided by the number of hours worked. Know that this includes different types of compensation that caregivers may receive like performance bonus, shift differentials, and on-call pay.

    For calculating overtime pay correctly, make sure to include different pay types and compensation, and not just the base hourly rates. A home care payroll software may track and calculate the overtime pay much accurately. For instance, with CareSmartz360, remuneration expenses and overtime hours can be easily calculated based on the rate entered and total hours spent working.

  • On-the- Go Payment for On-Call Shifts:

    On-call shifts is another area that home care agencies tend to miss upon payroll compliance. If your agency caregivers are always on-call, it’s really important to compensate them well for their time.

    Know that this includes having a well-drafted agreement about compensation for 24-hour shifts and live-in shifts, track working time, and have robust time certification that includes reporting work-related interruptions for meal time and sleep time.

    You must also pay for work beyond the scheduled shifts and ensure additional work performance, time records, and appropriate hourly and overtime pay rates. Relying on verbal agreements may bring a lot of legal challenges down the road. Therefore, it’s crucial to keep accurate records and have a system for tracking and compensating caregivers for on-call shifts.

  • Avoid Rate Manipulation:

    Rate manipulation changes rates for evading paying employees full overtime. Know that all this may include reducing the hourly rates when working overtime or changing the rates on a weekly basis for paying caregivers for paying a set target amount every week.

    While rate adjustments are allowed when paying caregivers for different work types or premiums for certain shift types like 24-hours or even weekends. Therefore, it’s really important to ensure that rate adjustments comply with the payroll laws.

    For avoiding rate manipulations, make sure to work with homecare payer software solutions for keeping track of payroll adjustments and ensuring caregivers are paid correctly.

  • Equitable Compensation for Time Spent Traveling:

    Travel time between clients during a workday is legally compensable based on hours worked. If your caregivers drive between multiple client locations in a single day, a home care agency owner must pay them for time traveled and break between, if it’s not long enough for pursuing personal activities.

    But, it may get really tricky to determine the right time to pay for travel time as the DOL has taken the position that you must pay for estimated travel time driving from one client to the other.

    For avoiding any problems, it’s crucial to ensure that caregivers are paid for all the time worked. All that’s needed is to write down into the contracts and have reasonable process for caregivers to be paid for an increase in travel time changes. A payroll software helps keep track of travel time and ensure caregivers are paid accurately.

Final Words

Whether you’re thinking of starting a home care agency or growing an established agency, know that Compliance is the Key. After all, at the end of the day, spending some extra dollars for following these payroll laws helps save you money by protecting you from litigation.

Investing in the right tools like CareSmartz360’s payroll software acts as a valuable tool in ensuring compliance for your home care agency. With the right payroll software, you will be able to automate the processes involved in payroll calculation like time tracking, employee classification, and overtime pay calculation. Generating accurate and timely payroll reports to be able to comply with payroll laws would also be possible.

Download Blog


Related blog posts:

Agencies – Stop Doing These Billing and Payroll Mistakes While Scheduling
Elevate your Home Care Billing and Payroll Processes with CareSmartz360

We've just scratched the surface.

Our users reported 95% customer satisfaction in 2023. Schedule a personal walkthrough to see CareSmartz360 in action.

Request a Demo